Coalition energy lunacy deepens

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The AFR’s Ben Potter has done a good job of summarising recent improvements to the National Electricity Market today:

We sweated through the second hottest summer on record, Hazelwood’s eight 200-megawatt brown-coal-fired turbines were benched, yet the National Electricity Market made it through with no serious supply shortages that could be blamed on lack of generation.

Prices in the National Electricity Market mostly fell, reversing a deeply worrying trend that set in after the power outages and blackouts of the infamous summer of 2016-17 and the near panic pricing triggered by Hazelwood’s closure last March.

The South Australian and Victorian governments took matters into their own hands, laying in the 100MW Tesla-Neoen battery and some emergency gas-diesel turbines. The Australian Energy Market Operator marshalled 1800MW of “demand response” reserve power and recommissioned gas plants, mandated gas turbine availability and constrained instantaneous wind output and traffic on the high voltage SA-Victoria interconnector at key times.

Just as importantly, the grid continued its unstoppable evolution. Wind and solar power – rooftop and large scale – surged, rooftop solar helped “shave”, ie reduce, record demand peaks in Queensland and South Australia, making blackouts less likely. Private demand response and wholesale demand management grew to complement AEMO’s efforts, with surprising benefits.

There is more than 5000MW of wind and solar under construction. 1000MW is being installed on rooftops each year, plus there are myriad plans to mobilise all of it in super-efficient virtual power plants.

This is a fantastic outcome given nothing has been done to address the real problem: the price of gas. The Hazelwood closure was a side issue that only made the real problem worse. Australia always planned to use gas as its transitional base load fuel before the gas cartel stole it. When Hazelwood closed, it increased grid reliance upon the gas turbines that set the marginal cost in the NEM.

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It is heartening to see that this effective private carbon price applied by the gas cartel has so accelerated constructive change in the grid. Given time, the cartel will lower prices significantly more by effectively wiping itself out (not that that will help large scale gas users).

Unless you do something really, really stupid. Like this, from The Australian:

Malcolm Turnbull faces a challenge to his signature energy ­policy from a group of Coalition backbenchers, including Tony Abbott, Eric Abetz and Kevin ­Andrews, who have formed a lobby group to promote government support for the construction of new coal-fired power stations.

Liberal MP Craig Kelly and Nationals MP George Christensen yesterday claimed more than 20 government MPs had joined the newly created Monash Forum, named after World War I military hero John Monash, a key figure in opening Victoria’s ­Latrobe Valley to coal production.

The Australian was told last night that Barnaby Joyce had thrown his support behind the new informal political faction along with up to 11 other Nationals. The former deputy prime minister did not respond to ­requests for comment.

The lobby group could threaten the Prime Minister’s national energy guarantee (NEG) as he ­attempts to secure support from state and territory governments for a new national framework later this month.

While not ­opposed to the NEG, the Monash Forum aims to test Mr Turnbull’s assurances to the Coalition partyroom that the government framework is “technology-neutral” by aggressively pushing for more coal-fired power stations.

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Both the NEG and any push to return to coal-fired power stations will only slow the drop in prices as it injects actual and policy risks into renewable investment. The NEG is a running joke with no effective policy substance. More coal power would take a decade to come on-stream by which time myriad storage technologies will be materially cheaper anyway. This before we even consider the policy risks from the opposition, polity and global decarbonisation push.

The Coalition really is an outstanding energy idiot.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.